All posts tagged Economy & Business

Companies seeking office space in Hong Kong are all dressed up, with nowhere to go.

Despite its punishingly high rents, the city remains a highly desirable spot for international businesses looking to set up shop at the foot of the world’s second-largest economy. The only problem: There isn’t enough space for them all, according to a report released Tuesday by Daiwa Capital Markets and property consultant CBRE. Read More »

Time was any self-respecting foreign bank that wanted to be a player in China was clamoring for a securities license. That’s so naughties. The new game in town is trust companies.

On Monday, Bank of Montreal said it was taking a 19.99% stake in Cofco Trust, a unit of China’s state-owned agricultural behemoth, Cofco Group. It didn’t say how much it was paying, and the deal still requires both Chinese and Canadian regulatory approval. Foreign investors are limited to a 20% stake in China’s trust companies.

China’s trusts are strange beasts that don’t have an equivalent in Western economies. They funnel funds from companies and wealthy individuals into a wide range of investments, but they don’t take on the risk of the investments themselves – although the regulator has asked them to hold more capital against certain types of risky assets. Read More »

It’s a raging debate in economics circles: Is China’s commanding position as the world’s low-wage factory floor eroding in the face of rising labor costs and a strengthening currency?

Just a few days ago UBS economist Jonathan Anderson wrote that China is at a turning point in its dominance of labor intensive industries such as apparel and toys. He says China’s share of exports in items made by armies of low-wage workers has peaked and that places such as Vietnam, Bangladesh, Indonesia and Mexico are picking up pieces of those markets.

Now that Chinese consumers have pillaged grocery stores and stocked their cupboards full of iodized salt to cure possible radiation spillover from Japan, the question many are asking is: What should one do with all this salt?

The suggestions from some of China’s citizens indicate that many are taking this sudden hoarding episode, which began after problems at Japan’s Fukushima Daiichi nuclear-power complex sparked concerns that radiation would spread to China, with a major grain of salt. Read More »

Japan’s nuclear crisis is fueling panic in China, where shoppers have spurred a run on salt in attempt to prevent radiation-related illnesses and to secure uncontaminated salt sources. China’s salt-buying rush is a sign of widespread fear that Japan’s nuclear woes will have far-reaching implications beyond the island. Authorities sought to control the situation and assure consumers that supplies of table salt won’t be affected by the crisis, and that iodized salt wasn’t an effective means of preventing radiation contamination. Read More »

Many global investors won’t find the declaration all that surprising, having seen shares in many companies buffeted over the past year by Beijing’s efforts to wrestle with soaring house prices while trying to avoid undercutting the construction industry. But it is remarkable sign of the times nevertheless. Read More »

With China’s economic recovery gaining momentum, can appreciation of the yuan be far behind?

That’s the logic behind a growing belief that the Chinese currency – first de-pegged from the dollar in July 2005, then unofficially re-pegged in July last year – is likely to be unleashed again by the government now that new economic data indicate that the worst of the economic crisis is well past. Read More »

It seems unimaginable that financial markets could produce another bubble so soon after the devastating credit crash of 2008, but officials and economists gathering at a conference on Asia sponsored by the Federal Reserve Bank of San Francisco this week were worried about just that. In this case, the worry was a bubble in Asian stock and housing markets.

Stock markets in China, Hong Kong, India, Indonesia, Singapore, South Korea, Taiwan and Thailand are all up by well over 40% this year. Housing prices are rising too. (Russia and Latin America mirror the move.) Thanks to their appreciating currencies, these markets are up even more in dollar terms, doubling in some cases. And the rise is even more startling when one looks at percentage changes since the March lows.

Thanks to the low interest rates engineered by central banks in struggling developed economies, investors have a tempting moment to borrow cheaply and leverage up their holdings of securities and other investments, particularly in places where economies and currencies seem to be on an upward march. Borrow dollars, use the dollars to buy, say, Indonesian or Brazilian stocks, and you can make a mint. (Well, you could at least until Brazil put on capital controls limiting foreign inflows this week.) Read More »

The International Monetary Fund has swelled in size over the past year as the crisis convinced governments the world economy needed a stronger backstop. But will a bigger and better IMF really affect how countries manage their economies? Asian countries in particular have preferred to rely on rainy-day funds they accumulate themselves, rather than borrowing from the fund — a practice that will be difficult to change. In a speech by John Lipsky, first deputy managing director of the IMF, at a conference organized by the Federal Reserve Bank of San Francisco, Mr. Lipsky is diplomatic enough not to mention China by name, but with $2.273 trillion in official reserves and counting, the country is obviously central to any discussion of reserve buildup. Here is an excerpt:

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One issue of importance that will involve directly many Asian economies is that of reserve accumulation and saving surplus. As you well know, many countries have rapidly built up official foreign exchange reserves over the past decade, in part as greater self insurance against balance of payments—primarily capital account—shocks. Global economic efficiency would have been enhanced if the IMF had been able to provide the insurance demanded by these countries, but doubts about the amount of available financing and the conditions attached to this financing have encouraged self-insurance.

Such self insurance is costly both at the country level — given the foregone domestic absorption and the complications for monetary and exchange rate policy — and at the international level, where countries wishing to build up their reserves have tended to generate persistent current account surpluses. There is a real danger that in the wake of the current crisis, there could be renewed wide-spread efforts to add to reserves. It is clear that if such efforts are pursued simultaneously, one result would be to dampen the global recovery. Read More »

Count Guo Shuqing, chairman of China Construction Bank, among those befuddled by the Nobel committee’s decision last week to award U.S. President Obama the Nobel Peace Prize – although Guo’s suggestion for an alternative recipient, Chinese leader Hu Jintao, might not be at the top of most lists outside China.

The 53-year-old, a former head of the State Administration of Foreign Exchange who took the helm at China’s second-biggest bank in 2005, discussed the Nobel and a number of other issues in a wide-ranging interview Thursdaywith Dow Jones Newswires/The Wall Street Journal and a handful of other media. Here are some excerpts:

On the U.S. economy and the dollar

The U.S. dollar’s movement has been indeed very volatile, but that has been a quite normal phenomenon in the past five decades. The [global] market may have exaggerated the jitters and concern over the dollar. It would be very difficult for any other currencies to replace the dollar in the foreseeable future, since it is a currency used by the world’s strongest economy, a country with the most developed financial system, and a currency that has been since long internationalized, although it also faces this or that problem. The U.S. economy remains the world’s strongest, most innovative economy. Although its share in the global economy has fallen somewhat, it remains around 20%, a level that won’t change within a long period of time. Read More »

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